Week In Real Estate 19.1.18

Australians can boost their first-home savings by putting an extra $30,000 each, or $60,000 per ­couple, into their superannuation, Federal Assistant Treasurer ­Michael Sukkar says.

He says allowing people to save through their superannuation will “provide a much-needed tax cut” to first-home buyers.

Under the changes, people can contribute another $15,000 a year or a total of $30,000 to their super within the existing contribution caps. This allows them to take advantage of lower tax rates on super contributions and earnings.

From 1 July, they can withdraw extra contributions made since 1 July last year, along with the earnings from those contributions, to help buy their home.

Sukkar says the system will allow most first-home buyers to “accelerate their savings by at least 30%”.

I/O Drops As Banks Restrict Risk

The share of interest-only loans sold through mortgage brokers has dropped over the past year, with banks clamping down on riskier lending through non-branch channels.

The country’s largest broker network, Australian Fin­ancial Group (which controls about 10% of the $1.7 trillion mortgage market), says interest-only loans counted for just 19% of home loans sold in the December Quarter. That is down from 47% at the same point a year earlier, and a peak of 59% in the last months of 2015.

Principle and interest loans sold through AFG have risen to 81%, up from just 53% for the same period a year earlier.

Ratings agency Moody’s reports that the delinquency rate for home loans rose in the last year, although they remain at low levels.

Loans more than a month overdue rose to 1.54% in the September Quarter last year, up from 1.48% a year earlier – but the delinquency rate was lower than the June Quarter.

WA Inspires Low Deposit Loans Push

A government-backed low-­deposit home loan scheme would help address housing affordability by getting more buyers into the market and adding to the housing stock, according to the Property Council of Australia.

The PCA highlighted the Keystart program in Western Australia, where buyers can purchase a home with a 2% deposit in Perth and up to 7% in regional areas without paying lender’s mortgage insurance.

Over the past three financial years, 70-75% of Keystart approvals have been for people building new homes or buying off-the-plan.

PCA chief of policy Glenn Byres says the program had been “useful in helping to drive supply” and had helped buyers who would otherwise be locked out.

“The big challenge right now is the deposit gap and people having to save sufficiently to meet the deposit requirements of ­lenders,” Byres says.

Population Growth Driving Economy

Australia will become the world’s 11th largest economy within the next eight years. The forecast is from the Centre for Economics and Business Research in the UK and is contained in its World Economic League Table 2018 report.

“Australia is one of the most popular countries in the world for inward migration as well as having natural resources,” says the report. “The growing population means that the economy is forecast to rise from 13th largest in 2017 to 11th largest economy in 2026.”

Population is growing much more quickly than most other countries the Western world, primarily as a result of high immigration.

The report mentions the need for higher spending on infrastructure, but it also means that Australia will be increasingly important on the global stage. Government policy at all levels will need to reflect this.

Townies Going Bush Drive Up Values

Townies seeking a tree change while earning a living with their gadgets are tipped to drive growth in regional property values this year.

Growing economic diversity and technological improvements are allowing more “city slickers from Brisbane, Sydney and Melbourne to go bush and earn a living”, according to Raine & Horne Queensland general manager Steve Worrad.

“Improved infrastructure such as better Internet connectivity is boosting the appeal of living and working outside capital cities, while it appears stronger mining conditions will also help values in some regional growth hubs in 2018,” he says.

Housing affordability held “major appeal” given prices started at less than $200,000 in some regional centres.

“This figure won’t even pay for the stamp duty on some properties in Sydney and Melbourne,” he says.

Quote of the week

“The share of property being sold to foreign buyers has dropped off, especially in the last couple of months. We attribute that to the stamp duty surcharges in places like NSW and Victoria and additional tightening to regulation and the availability of funding.”